The high price of loft-y ideals

Intended as a temporary fix, the city’s four-decade-old Loft Law lives on

Eric Baum, considered an owner by the loft board is standing on the staircase he built at 199 N 8th St., Brooklyn.

When the state Legislature enacted the Loft Law in 1982, it was seen as a relatively simple way to bring illegal apartments in former manufacturing spaces up to code and protect tenants. Nearly 40 years later, it has come to exemplify the perils of good intentions.

"The fact that it's 2019 and we still have a Loft Board is pretty unbelievable to me," said Suzanne O'Keefe, who served as the panel's first executive director.

But the state Legislature and Gov. Andrew Cuomo extended the nine-person board's 37-year life span again in June, and the adjudicating body now appears likely to live on indefinitely, as the city's manufacturing sector continues to shrink and residential tenants seep into areas zoned for industrial activity.

Under this year's revision, factory and warehouse buildings in large swaths of Manhattan, Brooklyn and Queens continuously occupied by multiple families in 2015 and 2016 may apply to become lawful dwellings, even if those units lack windows or are in basements—or even if there is an active industrial tenant on-site.

According to O'Keefe and other experts, it wasn't supposed to be like this. The city and the state intended the original 1982 Loft Law as a one-time amnesty for a few hundred illegal flats in a handful of largely abandoned manufacturing tracts in Lower Manhattan. The Loft Board, created to regulate conversions, would bring the often ramshackle domiciles up to code, prevent the creation of new ones and promptly dissolve itself.

The reason it did not play out that way—and why the Loft Board remains—results from a combination of negligence by the city, opportunism on the part of landlords and tenants, and state lawmakers' apparent preference for easy political plays over hard policy choices.

But for all the controversy the Loft Law has engendered—from its expansion to northern Brooklyn and western Queens in 2010, its further extension in 2013 to the most recent update this year—two facts have never been in dispute: Housing demand in the city has waxed, and the need for large industrial spaces has waned.

Blast from the past

In the mid–20th century, the five boroughs were home to more than a million manufacturing jobs. By 1980 that number was down to 499,000. According to the latest data from the state Department of Labor, only about 68,300 such positions remain in the city.

The original Loft Law came just as the city's population began to rebound after two decades of decline: It shot up from 7.1 million in 1980 to 8.2 million in 2010. Projections have it hitting 9.1 million by 2030. Planning for those hundreds of thousands of new residents has been a preeminent challenge for the Bloomberg and de Blasio administrations, and it likely will dominate the tenures of their successors.

"The city is growing, and it needs housing," O'Keefe said. "How and where that housing is being created is very important. It should be where there are opportunities for services, transportation and schools."

But the Loft Law is not an effective generator of housing, and it never was meant to be, according to one expert who spoke with Crain's on the condition of anonymity. The original 1982 statute aimed only to legalize and regulate existing residential lofts in neighborhoods such as SoHo and Tribeca that were impractical to vacate but often did not meet basic fire and safety codes and other multiple- dwelling standards.

Once that work was done, the city was supposed to vigorously enforce its zoning and building codes and crack down on renters and property owners who violated those rules.

Instead, officials did little as industrial landlords in the outer boroughs opened their doors to a new generation of urban pioneers. Manufacturing interests, meanwhile, desperate to protect every inch of their designated territory, discouraged the city from undertaking a large-scale rezoning of neighborhoods set aside for warehouses, factories and other industrial uses.

The state Legislature's repeated enlargement of the Loft Law's coverage area and extension of application deadlines has effectively signaled that it will continuously amend the statute to sanction new unlawful residences no matter where and when they are created. In doing so, lawmakers have created a perverse incentive for people to illicitly move into manufacturing zones, as those tenants now trust that elected officials will continue to protect them.

Politicians and tenant activists have failed to consider that creating apartments in such an ad hoc manner can expose residents to potentially dangerous conditions and put them in competition for space with still-viable manufacturing concerns. And there is no guarantee that the infrastructure in such areas can support a long-term residential community.

More important, compared with systematic rezonings, today's piecemeal process yields relatively few new housing units. Based on records obtained via a Freedom of Information request, Crain's found that only about 600 buildings citywide have transitioned from manufacturing to residential use under the Loft Law since its enactment.

Board to death

Jennifer Weber was among the thousands of artists who embedded themselves in derelict Williamsburg industrial spaces in the early 1990s. But unlike many of her peers, in 1999 Weber decided to buy the 4-story brick structure she called home. One of her former neighbors in the building became her tenant.

In the early 2000s, she participated in the public- comment period that precipitated the 2005 rezoning of Williamsburg and Greenpoint. The changes the City Council passed enabled Weber to seek permits to convert the occupied upper floors of her property into legal apartments.

But before the renovation work was completed, the state Legislature passed its 2010 and 2013 updates of the Loft Law—which covered buildings in northern Brooklyn and western Queens. Weber's tenant—whom she said had previously informed her of plans to relocate—applied to have the unit recognized by the Loft Board under the new rules.

That has in effect superseded Weber's efforts to receive a residential certificate of occupancy from the city under the 2005 rezoning. She must instead apply for one involving the Loft Board, and in the meantime the statute prevents her from evicting her tenant.

Weber described a state of limbo that has persisted since 2014. Because the building lacks a proper certificate of occupancy, the loft resident has argued the unit should be legally exempt from rent. But the Loft Board has not rendered a determination as to whether or not that claim is valid. In fact, it has not "touched the case," Weber said, allowing the tenant and a roommate to live rent-free in the 5,000-square-foot space. Weber and her attorney furnished Crain's with materials indicating that she has received no payments for the use of the apartment since 2015.

"It's an almost unworkable situation," Weber said. "The tenants have no incentive to reach a consensus with the landlord."

The original Manhattan buildings covered by the law got their residential certificates of occupancy in 1985, but several hundred were still in the midst of the process when the Legislature passed the first expansion in 2010.

Only six buildings in Brooklyn have ever received a certificate of occupancy from the board, and the panel has issued none in Queens. A total of 340 buildings have an outstanding application awaiting the board's imprimatur—more than half the number that have ever received a certificate of occupancy.

"While the process often takes time to complete," Chuck DeLaney, the Loft Board's tenant representative, said in statement, "the end result guarantees that these unique work/live spaces provide affordable housing for artists and other members of the creative, maker/builder community."

Assemblywoman Deborah Glick, who championed the most recent Loft Law update, did not return multiple phone calls from Crain's.

But state Sen. Julia Salazar of Brooklyn, who supported Glick's bill in her wing of the capitol, seemed to acknowledge the legislation's faults and claimed the assemblywoman, the city and tenant advocates prevented her from amending it. She argued its passage was necessary, however, to protect residents of illegal lofts in her district and beyond who lacked eviction protections.

Salazar's solution for the continued creep of lofts into industrial zones? Tougher penalties for landlords who lease spaces illegally.

"I do not want to encourage anyone to move into any buildings that currently aren't zoned for residential use," she said. "I recognize the problems that have resulted from decades of property owners illegally renting out these spaces to tenants, and that is what we want to resolve."

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